Abstract : On January 13, 1987, noting a severe reduction in resources in the Texas Disability Determination Service (DDS), you requested us to (1) evaluate the effects that budget constraints imposed by the Social Security Administration (SSA) had on state agencies' operations and (2) determine whether SSA's productivity standards were appropriate. The state agencies' work-years for 1987 were reduced 3.7 percent from their 1986 level. Of the 54 agencies, 40 had reductions in their staffing levels. For fiscal year 1988, SSA plans to reduce state agencies' staff resources by 3.5 percent. Because of budget reductions, SSA limited the number of continuing disability reviews (CDRS) it required the states to do in fiscal year 1987. In allocating the DDS workloads and resources during fiscal year 1987, SSA reduced its CDR workload for the DDSs by 262,000 cases. This cost the Disability Insurance Trust Fund more than $200 million in unnecessary benefit payments annually. The same problem probably will exist in fiscal year 1988. SSA's current measure of productivity, which was used to allocate staff to state agencies, does not allow for accurate or uniform comparisons of productivity. A new measurement system being developed by SSA will correct most of the problems with the current system. We are recommending that SSA provide the states with additional resources to do more CDRs and modify its new productivity measurement system to further improve SSA's ability to measure and compare productivity.